SINGAPORE - Rents for retail space in Singapore are expect to fall more sharply in the second half of this year amid mounting vacancies from the fallout of the Covid-19 pandemic, according to a report by property consultancy Cushman & Wakefield (C&W) released on Thursday (July 16).
Although most retail businesses here resumed operations from June 19 after a two-month circuit breaker period, social distancing measures remain in place. This left many activity-based tenants, such as in food and beverage and health and wellness, unable to operate at full capacity, which could lead to many businesses shuttering for good, the report said.
As a result, vacancies in non-prime locations are expected to rise in the second half of 2020, it added.
"The entire retail market may see steeper falls in rent in H2 2020 due to higher expected vacancies, lower footfalls, social distancing measures and economic uncertainties due to Covid-19," said Ms Christine Li, C&W's head of research for Singapore and South-east Asia, in the report.
"Currently, many landlords are still maintaining close to pre-Covid asking rents, but as vacancies rise, landlords are expected to become more flexible," she said.
The firm said prime retail rents slid across the board in the second quarter from the previous three months, led by a 3.5 per cent drop for rents in other city areas to $20.88 per sq ft monthly. Prime rents fell 1.5 per cent in Orchard ($34.73 per sq ft) and 0.9 per cent in the suburbs ($31.56 per sq ft).
For the whole of this year, C&W expects prime rents in Orchard and other other city areas to fall by about 10 per cent, while suburban prime rents may see a smaller 5 per cent drop. Ms Li said rents will be less affected in popular prime spaces in sought-after suburban malls, which are able to maintain high occupancy levels due to their strong tenant profile.
During the second quarter, indoor family attraction Kidzania Singapore in Sentosa announced its closure after four years, while German-themed Starker Bistro closed all seven of its outlets in Singapore.
More vacant spaces in non-prime locations are expected to come into the market in the second half of 2020, as activity-based tenants are usually located in non-prime spaces within a mall because of their larger size requirements, said C&W.
There could also be an overall fall in new demand for retail spaces as new F&B tenants explore delivery options such as cloud kitchen or central kitchens because of current social distancing measures, it added.
Among the retail casualties so far this year, Esprit has closed 12 outlets islandwide, Robinsons is moving out of Jem in August, while Isetan will not renew its lease at Westgate when it expires in December.
C&W said some mall operators are able to reinvent space to secure some interesting replacement tenants. Jem was able to reconfigure its layout to accommodate Ikea's first concept store, taking over the vacancy left by Robinsons. The concept store will open next year.
Mr Mark Lampard, C&W's executive director of regional tenant representation, said: "There is some opportunity for retailers to pursue prime retail spaces during this time as vacancies rise; alternatively, they could also explore suburban prime options for more stability.
"What is very clear is that retailers have the opportunity to sharpen their e-commerce channels, including virtual live sales, given that it is a major mode of transacting business now."